My guest is Sam Rosen, Managing Director and Vice President at ABI Research. This episode was recorded on Mar 24, 2016

Sam and I discuss mid-range pricing for VR, how enterprises might use AR in customer-facing activities and more.

Sam, Managing Director and Vice President, Consumer, leads a research team focused on disruptive innovation in video systems (multiscreen and cloud video, middleware and DRM, OTT), mobile devices (wearables, enterprise use of smartphones, emerging device technologies) and emerging interactions (augmented and virtual reality systems, new interaction paradigms, and new technologies).

Sam’s 20-plus years of experience in technology and strong industry relationships help him to identify the competitive forces impacting his clients and map out winning strategies to keep his clients on the cutting-edge of a rapidly changing market.

Prior to joining ABI Research, Sam headed his own company, Blue House Tech, LLC, carrying out contract research and analysis projects for ABI Research, among others. He began his career working in the design and architecture of microprocessors before transitioning into client-facing field application and marketing roles. Previous positions include Design Engineer at Intel, Principal Architect at Lexra, a semiconductor IP start-up, and Principal Engineer at several wireless semiconductor start-ups.

Sam is a member of IEEE and the IEEE Computer Society. He is frequently cited in industry publications, including The Wall Street Journal, EE Times, Communications Daily, IPTV News, Fierce Cable and Advanced Television. He also appeared as an expert on NPR and regularly leads keynote presentations and panels at conferences, including CES and IBC. Additionally, Sam holds a patent for a High Performance RISC Instruction Set Digital Signal Processor. He received a BS in Electrical Engineering from Washington University, a MS in Electrical Engineering from Stanford University and a MBA from Arizona State University.

When recording the episode, Sam had Tookie the parrot in his room. Since Tookie can also be heard, we thought a picture would appropriate.

Interview transcript

VRguy: Good to be talking with you again. Would you mind introducing yourself and what you are working on, please?

Sam Rosen: Sure. I’m Sam Rosen. I lead the consumer group, ABI research and as a part of that I own our augmented and virtual reality team. We engage with a number of suppliers, both technology, component and service suppliers in the ecosystem, around their product strategy, their outlook for certain markets, competitiveness et cetera. I think it’s a great time for AR and VR. We are investing a lot in this space in terms of research, because of the fast pace at which it’s taking off and adapting and taking on new challenges.

VRguy: Very well. One thing that I have been curios about is your take on form factor of VR headsets. Today we have the phone based – take your phone, slide it into a holster – and then we have the PC-based from factors. Do you see one being more prevalent than the other? Do you see some middle ground or new form factors coming? Like phones that are … Maybe phone hardware but not really use this phone and permanently integrate it into a headset?

Sam Rosen: First of all, we break out the category into three major categories, not the two that you mentioned. In addition to mobile-reliant … Those things like your VR cardboard and the tethered devices, we have more of an augmented reality smart-glasses type of workflow. If you look at them from a unit perspective. All three are growing very heavily. Certainly the mobile-reliant has had a little bit of a head start in 2015 and into 2016. Now that you’re starting to see those tethered devices ship, those numbers are growing really well, and then the smart glasses are growing in the enterprise.

There tend to be more standalone devices and take on. There is a potential for more of a standalone VR category where you take something like Google Nexus and basically build a very low cost phone into your headset. That has a dedicated use factor. It can have the connectivity. It can have the App ecosystem. I think some of the things we saw at Mobile world congress, like the LG glasses, start to move that way. I think some of the designs we see percolating through the ecosystem. They adopt that form factor a little bit more.

VRguy: Okay. There has been a lot of press attention around gaming as sort of an initial big market for VR. But as we look a little bit into the future, what other key applications do you see and what use cases? Will I use the headset only at home or is that going to be a permanent part of my bag. How do you see that evolving?

Sam Rosen: I think certainly the tethered headsets gaming is the primary applications. You find some relatively small application and enterprise either through high end retail, experience-based. You could have the laser-tag of the future taking to virtual environments. You might be able to do something with a tethered or sort of a wireless tether type of application in those. You have some sports categories and military categories that share a lot of similarities with gaming. We see all those as being based on the tethered applications. The mobile application … I think consumers are still experimenting with these. Certainly the low cost of cardboard has made experimentation easy. At the same time, where you find very low price or even free peripherals given out as promotions. You find that the stickiness tends to be very low and the life cycle and commitment to using that, very, very short.

I think that a lot of these will be either quickly discarded or put into a drawer and not taken out. I do think, as you start to get into some 3D movie applications or simply isolated movie applications, and as you see this 360 degree content form factor become more commonplace as Mark Zuckerberg would like us to do over the next couple of years. I think that there is the ability to have that headset by your bedside and spend that last 20 minutes or 30 minutes before you go to bed, engaging in 360 degree content. I also think in the same way that a number of frequent travelers have a very nice, fairly bulky pair of headsets that they use on airplanes. The Gear VR makes a very excellent pair of headphones for your eyes. That idea of wanting that isolation and that safe space, can be provided by VR headsets. I do think you’ll see some traveler oriented use cases that are based on these headset form factors.

Then finally, while the reaction to Google glasses and the public space was fairly profound and negative, I think you’re starting to see use cases in enterprise, starting in more the industrial and heavy type of applications and then making its way through other applications, including medicine and pharmaceuticals. Other places where you have very specialized daily intensive of workflows. I think you’ll see those catch on as a smart glasses they are worn during the workday.

VRguy: Two points that you brought up there that I would love to expand on a little bit. On the smart glasses, I can certainly see smart glasses being used heavily in confined spaces, meaning private spaces like warehouse or production factory. But given the negative public reaction that you mentioned. Do you also see that becoming part of car rental check out where people that might be wearing these type of devices, interact with the everyday consumer?

Sam Rosen: I certainly think that you will start to see them. I think you are going to … It will be the area of experimentation has yet to begin. UPS drivers, truck drivers, delivery people will happen first. I know that there are some applications in medicine related to medical records. Some of these require more audio functionality than video functionality, for example, recording medical notes while you are in the patient room. I think there will be a little bit of training, both of the professional and the public around that. There are applications today where you do have that direct one on one engagement between a service personnel and a consumer, and the service personnel is restricted to looking down at a screen that is in front of them, typing on a keyboard that’s in front of them and then occasionally turning away to make eye contact with the customer.

I think in that application, having an offset visual system could actually make that a more natural conversation. You may still have diversion of the eye downward and then upward, like people do with bifocals, but it may be more natural. I think we will see some experimentation. I think you’ll see some industries that find the benefits outweigh any social awkwardness in other industries that find that; No, we want the best person-to-person conversation, and we’ll do that.

VRguy: Interesting. Then you mentioned 360 degrees videos on one hand and then the novelty aspect and perhaps quickly the discarded promotional Google cardboard type devices. One notable experiment is obviously the New York Times providing some video journalism. Are you hearing or seeing this getting picked up, or is it still treated more as one time novelty?

Sam Rosen: I think there are some consumers that have started to engage more frequently with 360 degree content. You have a real investment in VR contents stores. That’s actually an area research that we are starting to kick off. In much the same way that I think five to seven years ago, you had a proliferation of applications store for mobile devices and then a winner to two or three that worked. I think you’re seeing the same behavior today in the VR ecosystem. I do think that you’ll have space for a couple of video aggregation sites around 360 degree video. I do think that you’ll find both from a personal perspective, especially those people that live alone and have more time for that interaction that doesn’t break social boundaries.

Then into potentially group settings where; Hey, I just saw this, let me show you this. I do think that 360 degree video will become part of the lexicon and become a normal experience. I don’t think that the viewing session length will be very long for some time. The potential where you might have long viewing sessions with 360 degree video, is this area of interactive storytelling. Where instead of experiencing a movie with both a fixed timeline and a fixed camera angle, where you can start to alternate first the camera angle and then as it gets more interactive, start to alter the timeline.

VRguy: Got it. You mentioned the video aggregators and I certainly see parallels from the development of web and mobile, to development of VR. People are starting to work on advertising in VR and app stores in VR. Is there anything that you see that’s unique to AR and VR and is not really prevalent in the mobile and web worlds?

Sam Rosen: I think it continues to push computational boundaries. Both in terms of GPU and rendering and bandwidth, in ways that probably are similar to what we’ve seen before in the transition from, let’s say SD to HD and text based web content to graphical web based content to video web based content. I think some of the investment cycles where you see a number of companies innovating in a certain area, are very similar. I think the one thing I would say that might make AR VR different is that; I do think there’s space for more players than you might have in the phone ecosystem today. Because of those different use cases and needs that we talked about. We started a piece of research that we will be publishing shortly, that within the enterprise, AR segment identifies about 20 major use cases that are really catching on right now across five to ten verticals. If we wanted to, I think we could get to a 100 pretty easily.

The fact that you have these different applications means that you might have different systems requirements. For example, a system designed for indoor use might be every different than a system designed for an outdoor use. You have monocular and binocular systems. Those are just providing 2D information and 3D information. You have systems that might be able to get by with a limited field of view and relatively small amounts of data, that might have much better battery life. Versus those applications that might need to be more immersive and therefore have even bigger batteries or shorter battery life, more frequently changed batteries. I do think that the specialization, especially in the enterprise space, but maybe also if some consumer glass applications catch on. You can have a space for more winners than you do in the smart phone Eco system.

VRguy: Very good. Many homes you have the set up boxes connected to the TVs. Do you see a lot of work in having a VR version of the set up box or content delivered by the cable provider and do you expect those to catch on?

Sam Rosen: I think that’s a big question. Right now the people that are pushing 360 degree or … Which can be either a doughnut definition or a spherical definition of video, tend to be more the Facebooks, the YouTubes, Oculus, Jaunt. Other people like that. There is a need for a number of standards in VR. Especially as you talk about live broadcast content. Some of the challenges include the camera angle and the individual rendering. Whereas with a certain traditional video, you go from having a single rendering, where everyone sees by and large the same view at maybe a different resolutions. Maybe a couple of different aspect ratios, if people are using older TVs. But in VR, each person’s experience is somewhat different. You need to decide whether you are sending down the entire frame and doing all of the decoding locally and then selection a sub portion of the image to view. There may be warping associated with that.

There may be visual systems where you can send the entire thing that only decode the region of view. That’s going to be a latency trade off, as well as a performance requirement on the device. Impacting batteries. There are other systems where you might want to be more interactive and actually only send down the pipe. The portion of the screen a specific user is viewing. All of these IP broadcast versus multi castings, that are just starting to be very important as you have the rise of online video viewing. Are going to be even more difficult for VR because of its unique challenges. I think that’s where you see the gaming types of experience, the movie types of experiences coming together and live broadcast is going to push those challenges the most and that’s where our standards would be needed first.

VRguy: Understood. One last question. Today, when you look at prices for VR devices in the consumer world. You have the $15 Google cardboard and then on the high end consumer side between the PC that you have buy, the high graphics card and headset itself. You can easily get to $1500. What do you see as the sweet spot in the middle and what do you think is the right price target for something between 15 and 1500?

Sam Rosen: I think it depends on the audience and the application. I do think that free and $15 is arguably too cheap in that it becomes disposable. The user lack commitment to it and doesn’t start to adopt that. The $100 price of Gear VR, I think is a really good price for that type of product. I hope that it balances the accessibility versus commitment fairly well. I hope that people start engaging in systems like that. Something like the ViewMaster that comes in more between 30 and $50, may ultimately win out over those $100 accessories. Depending on what people are looking for and what experiences use additional features that may appear in the higher end headsets. In terms of the $1500 systems for gaming. I do think there is a core audience of gamers that will take that and pick that up. If you look at the applications of VR in enterprise, I would argue it can easily sustain that and even higher values as you start to put wireless tethers in and battery packs and other things.

It’s difficult to come up with one price because there are so many different use cases. But I do think that the 50 to $100 range for the mobile reliant maybe a $300 range dropping down to 150 for a standalone VR headset for consumer viewing video. Having some experiences. Playing some 3D games and then with the console based or PC based solutions. I think in three years when the PC bill becomes more mainstream and that prices for the headsets drops down so that the total system is more in the 750 to $900. I think that would be better than the $1500. I think in terms of the core gamers, you’ll see good uptake of that.

VRguy: Good. Sam, this has been fascinating. Thank you very much. Where can people connect with you if they want to read more of your research or more of your findings?

Sam Rosen: Abiresearch.com, is our website and we have a lot of research coming out. We recently did a webinar on AR and VR. Eric Abbruzzese and my team did that. That’s available for the public with registration. Then certainly anyone is free to email me at rosen@abiresearch.com.